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The market appears to have shrugged off yesterday’s wobble that followed the publication of the minutes from the last Fed meeting. Chairman Ben Bernanke has brought to bear far greater levels of transparency to the US central bank during his tenure, but sometimes the result of such openness is not necessarily greater clarity.
I fear that until the Fed actually does start easing on the accelerator pedal, there will always be a level of ambiguity to their communications, which brings with it uncertainty for the market. In such circumstances, volatility – uncertainty’s hot-blooded cousin – is usually in tow.
We saw a tranche of upbeat economic reports this morning that lend support to the Fed’s optimistic view of the outlook for the economy and this will have done little to quell speculation that the Fed may be mulling over a small taper come next month’s FOMC meeting.
Jobless claims fell 21,000 to 323,000 over the shortened course of last week (cropped to four days by the Veterans Day public holiday in the States). The drop was somewhat offset by an upward revision to the tune of 5000 for the previous week. Despite the data being clouded by the abbreviated reporting period, the overall trend seems to confirm further recovery in the US jobs market.
Markit’s flash manufacturing PMI rose to 54.3 from October’s equivalent reading of 51.1, implying the sector is starting to heat up, and a healthy rise in the new orders sub-index suggests things may continue to bubble over into next month.
The headline rate of the Producer Price Index declined in October, with energy prices dragging down costs at the wholesale level. This is in line with wider inflationary trends, with consumer prices also dropping last month as shown by a report on Wednesday. Inflation may yet play a key part in the Fed’s call on whether to maintain or taper its stimulus.